Investigate Legal Shield, law firms ask
An argument is put forward that there is no reason for the company not to be in a position to pay its service providers.
The Bank of Namibia (BoN) and the Namibia Financial Supervisory Institutions Authority (Namfisa) have been requested to investigate the reserves of Legal Shield after at least 11 law firms have complained about non-payment of legal fees.
The complaint emanates from a court challenge lodged by legal firm Kruger, Van Vuuren & Co. for an allegedly substantial amount not paid out by legal insurance company Legal Shield, and a subsequent confirmation of non-payment to the Law Society of Namibia since September.
ISG Namibia, which handed in the complaint on behalf of the firms, maintains that the Trustco Group should have enough money to pay for legal services provided to clients of Legal Shield, and suggests that there might be a possibility that money is being swirled around the various companies in the group.
The Trustco Group offers services including banking and financing, insurance, investments, and others.
Eben de Klerk of ISG Namibia wrote in the correspondence to BoN and Namfisa that it was possible that Trustco Bank was a related party to Legal Shield or that the bank's finances might be controlled by one or more persons in control of Legal Shield.
“Both insurers and banks are regulated entities with statutory reserve requirements.
If it is the case that these entities within the group are under overlapping control, there exists the risk of funds being transferred from one to the other to create the impression, when observed at a given point in time, or for a short period, that reserve requirements are being met,” De Klerk argued.
He suggested that Namfisa should investigate this possibility and requested that such an investigation be coordinated by the central bank.
The argument is also made that Legal Shield, as a matter of course, should generate enough money to pay service providers.
According to a sample contract, the lowest premium payable for Legal Shield cover alone is N$111.80 per month. With 60 000 policyholders, Legal Shield should, therefore, collect at least N$6.7 million per month, and N$80.5 million per year.
Therefore, the argument goes, it is unlikely that Legal Shield cannot honour its insurance contracts, unless, De Klerk says, Legal Shield is not keeping to its statutory reserve requirements.
CATHERINE SASMAN
The complaint emanates from a court challenge lodged by legal firm Kruger, Van Vuuren & Co. for an allegedly substantial amount not paid out by legal insurance company Legal Shield, and a subsequent confirmation of non-payment to the Law Society of Namibia since September.
ISG Namibia, which handed in the complaint on behalf of the firms, maintains that the Trustco Group should have enough money to pay for legal services provided to clients of Legal Shield, and suggests that there might be a possibility that money is being swirled around the various companies in the group.
The Trustco Group offers services including banking and financing, insurance, investments, and others.
Eben de Klerk of ISG Namibia wrote in the correspondence to BoN and Namfisa that it was possible that Trustco Bank was a related party to Legal Shield or that the bank's finances might be controlled by one or more persons in control of Legal Shield.
“Both insurers and banks are regulated entities with statutory reserve requirements.
If it is the case that these entities within the group are under overlapping control, there exists the risk of funds being transferred from one to the other to create the impression, when observed at a given point in time, or for a short period, that reserve requirements are being met,” De Klerk argued.
He suggested that Namfisa should investigate this possibility and requested that such an investigation be coordinated by the central bank.
The argument is also made that Legal Shield, as a matter of course, should generate enough money to pay service providers.
According to a sample contract, the lowest premium payable for Legal Shield cover alone is N$111.80 per month. With 60 000 policyholders, Legal Shield should, therefore, collect at least N$6.7 million per month, and N$80.5 million per year.
Therefore, the argument goes, it is unlikely that Legal Shield cannot honour its insurance contracts, unless, De Klerk says, Legal Shield is not keeping to its statutory reserve requirements.
CATHERINE SASMAN
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